By Andy Sullivan and Kevin Drawbaugh
WASHINGTON (Reuters) - Senate Democrats on Wednesday postponed until mid-July a final vote on a landmark overhaul of financial regulations as they scrambled for crucial support from a handful of moderate Republicans.
The House of Representatives, however, was on track to vote on the bill by late afternoon or early evening. It was expected to pass easily.
The death of Democratic Senator Robert Byrd and cold feet among Republican allies has complicated efforts to round up the needed votes in the Senate and dashed Democratic hopes that a bill could be sent to President Barack Obama to sign into law by the July 4 Independence Day holiday.
Senate Democratic leader Harry Reid said the chamber wouldn't vote until it returns from its holiday break.
Plans to have Byrd's body lie in repose in the Senate chamber on Thursday presented a new hurdle to having action taken by week's end. Many lawmakers are sure to leave Washington on Friday for Byrd's funeral in his home state of West Virginia.
But Senate Democrats appeared closer to winning the Republican support needed after agreeing on Tuesday to strip out a controversial $17.9 billon tax on large financial institutions to cover the bill's costs.
Senator Olympia Snowe, a moderate Republican, on Wednesday said she was happy the bank tax had been dropped and that she could support the bill. Senator Susan Collins, another moderate Republican, said she was still studying the bill, but was inclined to support it.
Republican Senator Scott Brown, who had supported an earlier version of the bill, said on Wednesday he was still reviewing the final measure and declined to say whether he would support it. Brown previously had objected to the bank tax that was stripped out on Tuesday.
The White House on Wednesday said it was confident there will be enough votes for the Senate to pass the landmark legislation.
The delay in the Senate means several more weeks of uncertainty for the financial industry, which is bracing for tighter regulations, tougher oversight and diminished profits.
Still, analysts say it is a question of when, not if, the most sweeping rewrite of Wall Street rules since the 1930s becomes law.
"We believe final passage is still assured, but timing remains a bit of a question mark," FBR Capital Markets analyst Edward Mills wrote in a research note.
The bill, which aims to prevent a repeat of the 2007-2009 financial crisis that shook the global economy, is a top priority for Obama and would give him and fellow Democrats a big legislative win ahead of November congressional elections.
The bill would force banks to reduce, but not cease, risky trading and investing, set up a new government process for liquidating troubled financial firms and establish a new consumer-protection bureau. It would impose a host of new regulations on financial firms that would reduce their profits.
Wall Street and many Republicans tried to delay or water down the bill, but it has grown stronger during its year-long journey though Congress as Democrats have ridden a wave of public disgust at an industry that has awarded itself fat paydays while the rest of the country struggles with high unemployment.
ANOTHER NEGOTIATING SESSION
Democrats thought they had hammered out a final version of the bill during an all-night negotiating session last week.
With no margin for error in the Senate, Byrd's death left them one vote shy of the 60 needed to overcome procedural hurdles in the 100-seat chamber.
Dodd and other Democrats reopened negotiations on Tuesday to remove the $18 billion tax on banks that had been added at the last minute to cover the bill's costs, replacing it with other funding sources.
The bill now taps $11 billion in taxpayer funds from an unpopular bank-bailout program, which is being shut down early, and raises the amount that larger banks must pay to insure their customers' deposits.
Tapping the bank-bailout fund is not without political risks. Republicans involved in the negotiations said the money from the $700 billion Troubled Asset Relief Program, or TARP, should be used to pay down the national debt.
The White House says the bill would actually reduce the deficit by $3.2 billion by shutting down TARP ahead of schedule.
Even after Obama signs the bill into law, its final impact will remain unclear for several years while regulators put it into effect. Congress also could pass another bill to fix technical mistakes in the legislative language, said an aide to Representative Barney Frank.
(Additional reporting by Corbett Daly, Rachelle Younglai and Donna Smith; Editing by Leslie Adler)
